In the financial planning world, it's not uncommon to "fire" clients that are especially difficult to work with, not merely because the clients are unprofitable, but simply because they are so unpleasant for you and your staff even if they ARE profitable. In fact, many practice management consultants would suggest it's a best practice to systematically fire some of your most unpleasant clients, as it helps to create a more positive workplace for you and/or your employees. Yet the reality is that often clients who are difficult to work with are also those in greatest need - and in virtually all other helping professions, it's a requirement of the profession to help everyone in need, not just those who are the most pleasant to work with. Of course, the reality is that right now, there aren't enough financial planners to serve everyone out there, but nonetheless it raises the question: is firing the most difficult clients in a financial planning practice a best practice, or a sign of an immature profession?

The inspiration for today's blog post was a recent conversation I had with a friend who is a social worker, who was relaying some of the challenges he was facing with certain clients for whom he was responsible as a part of his job. And as someone who works with people struggling with mental illness and drug addictions, "difficult" clients for him make "difficult" financial planning clients pale in comparison.

Avoiding Or Getting Rid Of Difficult Clients

In the financial planning world, we often don't see really difficult clients (or at least, not for long), for the simple reasons that we both generally have the flexibility to choose which clients to work with in the first place, and we also have the flexibility to choose to stop working with clients we don't want to work with.

And in fact, ending relationships with "difficult" clients is not uncommon in many financial planning firms. In some cases, the reason might be that the client persistently fails to implement the advice provided - potentially even causing concern that someday the planner might be held liable for the client's bad outcome, even though it was the client who failed to implement recommendations in the first place. In other scenarios, the problem is simply that the client has such a negative or unpleasant personality, that the planner simply ends the relationship to avoid interacting with the client anymore.

As a result, "firing" your most difficult clients is actually considered a best practice by many/most practice management consultants. It can improve staff productivity to not have to deal with very difficult people and their often-time-consuming problems, not to mention simply improving morale by not needing to deal with unpleasant people in general. In fact, some would advocate that firing the most negative and difficult clients can be an especially effective leadership tool in a planning firm to demonstrate the firm's commitment to its staff to create a positive work environment (i.e., that it's more important that staff find their jobs positive and rewarding than it is to get that last dollar of revenue from a difficult client).

Of course, the reality is that in some cases, clients are "fired" from a practice simply because they don't generate enough revenue to be profitable; that isn't the point here. Planning practices are still businesses, and a business that isn't run in a profitable manner can't help anyone, so there's nothing wrong with not serving clients that the firm can't serve in a sustainable manner. The point here are the clients who do have the financial wherewithal to pay the financial planner (under whatever business model the financial planner operates), but are still separated from the practice because they are too difficult or unpleasant to work with, or are too non-compliant (i.e., don't comply with and implement recommendations).

Firing Those Most In Need Of Help?

Notwithstanding the fact that firing difficult clients is often considered a best practice, it also raises a difficult question - doesn't that mean that we as financial planners may be systematically dismissing those clients who are most in need of help? Is that truly the appropriate path if we wish to be recognized as a bona fide helping profession for everyone?

In other words, what does it say about financial planning that we take a subset of people who have sought out our help and deny them access to financial planning care and providers, because they happen to be difficult to work with? In the world of other helping professions, from psychology to social work to medicine and even religion and theology, such practices are completely unacceptable. All those in genuine need of care are served, at least in some fashion by some professional.

Yet in the financial planning world, it is routine and accepted to fire a difficult client, and without necessarily finding them an alternative source of care. At least in other professions, if a client is "unworkable" it is at least part of the accepted standard of care that the client will be transitioned to another practitioner/firm/agency/organization that is positioned to help. In financial planning, however, we often do little more than send some clients most in need of help back out onto the streets to fend for themselves.

Helping A Broader Range Of People

So how does it reflect on financial planning as a profession that we systematically refuse to help serve many of those who need our help, without any process to ensure that they receive the assistance of a professional at all? I have to admit, it doesn't reflect well on the profession, to say the least. If we truly want to be recognized as a profession, we need to help everyone who seeks out our services and are in need, not just those we happen to find it most pleasant or easiest to work with.

Of course, the reality is that as it stands right now, there aren't enough financial planning practitioners to help "everyone" anyway, and "difficult clients in need" are really only part of a subset of those we fail to serve (along with huge swaths of the mass affluent, and those who have no assets or disposable income whose primary needs are focused on debt and cash flow). And this clearly isn't a problem that can be solved overnight.

Nonetheless, I am still struck that when I compare what we do to my friend in social work, the reality is that occasionally difficult clients are just a reality of the incredible public service he provides - whereas in the financial planning world, it's typically considered prudent and a best practice to not work with such individuals, nor is it a part of our standard to ensure that they get help at all.

How do we reconcile such different perspectives on serving "difficult" clients in our respective fields?

So what do you think? Have you ever fired a "difficult" client who was in need of help, but just seemed to be "too difficult" to serve? Is there a moral or ethical professional obligation to serve that person anyway? Should there be? Do we need more firms that can serve such individuals to become a bona fide profession?

Related

We had this practice in the software development company I co-founded. There was no systematic lopping off of the “bottom 10%” a la Jack Welch with GE, but, we did turn down subsequent work opportunities with difficult clients.

There were a couple of criteria that we looked at when considering whether to end our client relationships. The first was profitability. There were some projects which we took on that we knew were loss leaders, so they were strategic. However, if we expected to make a profit and did not because of either far more work than we expected in a fixed price bid or tweaks and enhancements which were required that were not initially scoped out and we couldn’t get a change control for, then we’d not pursue a further relationship.

The second criterion was whether we could ever make the client happy. In some cases, no matter how much you lay out ahead of time what a process is going to be and what you can and cannot deliver, the client will expect you to turn water into wine. Even if you’re getting paid and paid well for the work, you’re generating psychic costs which do not show up on the balance sheet.

I think the same applies with the financial planning industry. There is no Hippocratic Oath which we take, and, therefore, have no obligation to serve everyone, even though many of us do serve the underserved in some capacity or another, usually through pro bono work.

Simply put, there are going to be some people who, for whatever reason, you’re never going to be able to please. You can pour heart, soul, and extra time into these clients and hear nary a word of thanks from them. Whether it’s just a wrong fit or unrealistic expectations, or a perpetual wrong side of the bed, it’s not the right client-planner relationship. In these dysfunctional relationships, just as in dysfunctional marriages, sometimes it’s best to throw in the towel and try to extricate yourself as gracefully as possible.

I have found that the best way to avoid these relationships is to improve the screening process which consummates the relationship in the first place. Do not be afraid to ask probing questions to establish fit. When I worked at Capital One, we called these behavioral interviews. It doesn’t matter if you can serve a need, the potential client has the need, and can afford the services, if you are going to fight like Archie and Edith Bunker, there is no point in taking the next step.

By not engaging or continuing in these relationships, we maximize utility of everyone involved.

http://www.serenityfc.com Alan Moore

Michael,

Great post. I have always been uncomfortable with the term “firing clients.” From my experience, planners fire clients for 2 reasons. 1) The client commands an extraordinary amount of time, making them unprofitable and 2) Clients refuse to do what the planner recommends.

I believe both can be addressed by adding life planning/financial therapy elements to a planners practice. Clients that need additional time may something psychological going on that needs to be addressed. I have worked with clients that seemed to be very needy, but when we got to the bottom of it, they just had a lot of fear about the markets due to previous bad experiences.

The fact is though, many planners don’t take on certain clients or fire clients, because the clients don’t fit their niche market. I believe that clients needing high levels of psychological assistance is a niche market in and of itself, and not all planners are trained to work with these clients.

http://www.pathfinderfs.com David Jacobs

It is also interesting to consider the case of education.

As a society we deem it important enough to make it freely available to everyone (at the K12 level). And at the college level, we have the community colleges which have a mandate to help everyone and places like Yale which have a mandate to be exclusive and to “fire” any “client” that doesn’t match their standards and performance.

I think the answer for the planning profession isn’t to force firms to accept all comers, but to create a publicly financed community college like service for those most in need.

http://trustedadvisor.com Charles H. Green

I applaud you for raising the question. Most planners, I think, just draw the line at profitability and let the consequences fall where they may. The idea of publicly financed service like David Jacobs suggests is probably anathema to many planners, though I think it’s a very valid idea.

Two other approaches from related industries may have merit. In the legal business, the idea of pro bono work is built into the system; a form of publicly financed service, I suppose, but also related to professionalism. The profession feels it needs to make some level of legal services available to those who can’t necessarily afford it.

In management consulting, the approach is a little different. Consultants all have their tales of “the client from hell,” but you’re not supposed to talk about it publicly. The client from hell is from the hell of the consultant’s own making: you’re supposed to know how to communicate with clients to effect change, and if your client won’t do it, the rebuttable presumption is that it’s the consultant’s fault. “Firing” clients is something you’re supposed to do, but only in extreme cases. Professionalism means you’re the one responsible, not the client.

Each industry has to find its own solution, but directionally I think the answer needs to lie in the question you’ve raised here. It’s clear that those who need it most are not the ones best equipped to pay for it.

Thanks for a great post.

Jim

If you and your clients can not communicate then both parties are wasting their time.

My physician once told me she had no time for patients who did not do their part in following her health care advice [lose weight, stop smoking, etc.]. She was always kind, understanding, and generous in my experience.

In the example above, my physician would probably be extra compassionate in dealing with patients who were difficult because they had been harmed by other medical practitioners.

http://bloghealingfinancialanxiety.blogspot.com jim schwartz

The Rick McCall Method of Termination of A Client Relationship

Profitability aside, here was McCall’s method of reconfiguring his relationship with a difficult client.

‘Today is graduation. There is not much more I can do for you as you are well versed now in planning. I’m glad to help you through a three month transition or graduation can be immediate. It’s your choice’

Of course, if one wants an immediate termination – that is graduation

Tom Gartner

Another great post. Doing pro-bono (or near pro bono!) work is important to me, and can be some of the most challenging, gut wrenching, powerful work I do to impact the lives of others.

Unless the person is disrespectful to staff or myself repeatedly, I don’t shy away even if it’s obviously unprofitable. They have needs as well, and most of us have some capacity if we really look for it to pay it forward. Instead of building homes for habitat for example, I think my utility is higher by doing some financial counseling.

Finally, I recently tried to fire a client I just couldn’t seem to make happy, but he quickly changed his behavior, and we are getting along great. Sometimes people aren’t rude or angry because of what we do, there can be other reasons in which we are completely unaware.

http://trustedadvisor.com Charles H. Green

I like Tom Gartner.

Michael Kitces

Tom,
I do consider this an issue above and beyond just serving the “unprofitable” client (which is a separate matter), but the more troublesome/problematic/difficult/downright unpleasant client.

By analogy – the emergency room doctor doesn’t get to just turn away a patient in need, EVEN IF the person is disrespectful to the doctor and/or staff. A person with a bona fide medical need “deserves” and receives help, and it’s both an ethical and legal violation to refuse service to someone for being rude and disrespectful. The professional standard for lawyers includes an obligation to serve the client regardless of the client’s temperament; in fact, some clients commit absolutely horrendous real world crimes, and are still entitled to a professional who supports and defends them, even if that client isn’t willing to cooperate in his/her own defense!

That’s not to necessarily say that therefore every practice must serve every person, but I do find it very striking that there is no apparent ethical, moral, or legal obligation for the financial planning “profession” to kick a person in genuine need of financial help out of the office because they’re rude/unpleasant/disrespectful/etc. In fact, we often celebrate practitioners who have the “good sense” to deny service to those in need because they’re not pleasant to work with!

I have to admit, I struggle to find other professions that accept such a practice as a part of its professional ethics.
– Michael

Tom Gartner

“Horse to water”

Unfortunately we can’t get through to everyone no matter how much we try. The ER doc analogy makes sense to me, we have a moral obligation to help if we can, but the lawyer defending the guilty doesn’t ring home at all. That’s a whole different ball of wax…

I am not sure the professional standards really hold-up at all. We have to look past that comparison.

The ER doc will help anyone who comes in the door because that is the job and that is the law. However, a general practitioner is not going to perform brain surgery, no matter the circumstance (the need-based argument), and unless it is a life or death situation, there is no ethical standard to accept a patient at all! In fact, people are turned away from care and patient / doctor relationships are terminated all the time. Need, in this case, is defined by an emergency. This would not hold anywhere in financial planning.

Part of the duty of being a planner is being a leader for clients. They are drawn to us and our personalities for a reason. If we speak about the importance of a balanced life and do not try to live one ourselves, we are frauds and our clients know it.

My primary role in this world is being a great father and husband. To accomplish this, I have to engage in activities that allow me to come home energized at the end of the day and be fully present with my family.

When I say yes to working with clients that do not allow me to do this, I am effectively saying no to my family…the very people I care most about.

It takes a lot for us to fire someone, but we did it twice last year. In both cases, there was a long history of verbal abuse, disrespect and poor decision-making captured in our CRM and hard files that predates my partner and I. Had we met them for an initial meeting instead of them being part of an acquisition, we would have never started working with them in the first place. I absolutely won’t tolerate abusive language to myself, my partner, or staff. That isn’t a life planning or financial therapy issue. It is a personality undeserving of our service. I have no problem terminating any relationship on those grounds, no matter how bad they need the help.

As Tom stated, we don’t fire people based on profitability. If we accept them as clients, we are all in. The concept of serving “unprofitable” clients as a form of pro-bono / volunteer work resonates with me…I view it the same.

The time and energy we have gained collectively as a firm has provided the capacity and energy to take on an additional 4-5 clients by eliminating those 2. We are now able to help more families in need as a result of letting go of them.

I think the better comparison is with accounting and law firms. You believe lawyers and accountants feel obligated to serve every needy client that walks in the door? I can assure you that isn’t the case!

Both of these professions have a much higher standard of ethics than the current landscape of the financial planning community. This post is an idea to consider, but it does not hold true for other professional service providers.

Michael Kitces

Gabe,
In the legal world, you CAN get a public defender to defend you in (criminal) legal matters, regardless of whether you’re someone people want to work with. As we say in the Miranda rights, “You have the right to an attorney; if you cannot afford an attorney, one will be provided for you.”

The point here is not that EVERY business takes every client; that’s not true in any profession. But every bona fide profession DOES generally have a continuum of care, including an offering for those in desperate need of help who can’t provide for themselves, or with whom no one else wants to work. And in many professions, it’s part of the standard of care that you can’t just reject people in need of help; AT THE LEAST, it’s expected that you will help transition that person in need to an appropriate provider.

We seem to distinctly lack that continuum of care options, and a standard for how to transition clients to it, in the financial planning world.
– Michael

Eric R.

Wouldn’t charging hourly solve this issue. Granted you might not be able to bill for all of the work that these needy clients generate but the vast majority of it should be compensated for with hourly financial planning.

Michael Kitces

Eric,
I’m not clear how charging hourly impacts the issue.

This has nothing to do with profitability.

Assume it’s a client with $1M/$3M/$5M/$10M who will happily pay any fee you set.

Except the client is unpleasant to be around, and generally extremely difficult to work with. Which, if you were a doctor, is irrelevant; but when you’re a financial planner, you fire the client regardless of his/her need for help or ability to pay.
– Michael

Eric

Yes I do understand that main purpose of your article was to discuss the issue of whether or not we should fire our negative, “trouble-child” clients who brings a lot of negative emotion and drama to your practice and staff. However, you also mentioned that we all have those clients who are typically fired by the advisor because the client is not profitable. I assumed that for a client to not be profitable, that would mean that the client is paying for services based on AUM or fixed retainer. Even commissions.

In all of these models, it is pretty common to have very high maintainance clients who produce X amount of revenue yet they require so much time that there is no profitability for said client. You mentioned that we are running a business and if a client isn’t profitable, we may have no choice, but to fire them. I was offering one solution for this particular profitability issue. It wont solve the negative trouble-child client, but it would enable us to profitible serve those high maintainance clients who require a ton of our time and might not be profitable if charges based on AUM or fixed retainer formula. In an hourly billing planning model, profitability is not as affected by whether or not a client is high maintainance and requires a lot of your time, because you are able to bill them at your hourly rate for hours worked for that client.

In regards to the other client that you discussed a the main topic of your article, the client who consistently brings lots of negative emotions and drama to your firm. The client who saps you and your staff of all your positive energy and emotions. For this client, I go farther for them then I probably should. I do consider myself a business man but also a public servant. For these clients I try to mitigate their impact and manage them as best I can. I may set boundaries and outline expectations for them. I will try my best to serve the clients, however of the client continues to disrupt my firm beyond a reasonable point, I may fire them. I guess my point is that I allow more flexibility and compromise my standards for these “troubled” clients in the spirit of a type of pro bono public service.

One caveat. I probably had a bit of a double standard here. I am more likely to give more leeway to clients who are special need, lower or middle income, or dealing with some major life issues like divorce, death, or other of life’s hard knocks. If I am dealing with a high net worth client who is that troubled child, high maintainance, and consistently brings negative energy to my business, then I may be less willing to compromise my standards. I will set expectations for this client and if they consistently fail to meet them, I will fire them. Obviously, there is no “cut and dry” here. It’s a judgement call. It be discriminatory, but my thinking is that these high networth clients will have no shortage of advisors who are willing to take them on as clients. Obviously if the HNW client is hugely profitable for me, yet they are equally as detrimental to my firm in regards to being very difficult, unpleasant, and bringing negative emotions to my firm, then it’s a tough decision.

Ultimately, I will try to do what’s best for the client and my business. It’s definitly not black and white. I spent 15 years in healthcare and regulary had discussions with doctors about this exact situation and doctors are all over the board with how they handle it. Some doctors re very quick to fire these clients. Some doctors will try to manage them by setting boundries and expectations for the client and if they continue to overstep the boundries, ultimately they will fire them. Some doctors in the spirit of public service and their hypocratic oath, will keep all patients regardless of how difficult they are or negativity that they bring to the practice. I would say that I am somewhere in the middle and I definitely look at each client individually and may make a different decision depending on the clients need.

Austin Colby

Michael,

When is it okay to fire a client might be a legitimate follow-up question.

Wouldn’t it also be considered a best practice to work with people whose company you enjoy and clients that you want to replicate?

I recently had a client try to buy my vote with their business. To me, that’s a pretty clear indicator that I don’t want to work with that client, regardless of best practices. Granted, they absolutely still need my advice and professional guidance.

Professionally, do I have to offer my services to every client who is willing to pay for them?

Full disclosure: I am generally in favor of working only with people that follow my two major rules:
1. they take my advice
2. they pay my fee for said advice

http://trustedadvisor.com Charles H. Green

Austin,

If I, as a management consultant, tried to adhere to your first rule, I’d have been out of business. At least in that arena, the recommendation to sell a business, terminate an important executive, change a business culture, all are received with the greatest of resistance. It is critical to engage the client to accept recommendations.

Nobody promises to take that kind of advice as a condition of engagement; it would be considered supremely arrogant for a consultant to insist on such a rule. It is part of the consultant’s job to make the client comfortable with your advice.

Interesting to me that a financial adviser considers it not arrogant, but a simple term of contract, that a potential client should take his or her advice.

Not my world.

Austin Colby

Charles –
To the point of the posting, clients that don’t take our advice effectively waste their own time, our time and everyone’s money.

I should be have clarified my full disclosure statement in that it is definitely a generality. 95% of my clients adhere to my professional advice. It’s the 5% that don’t that make it more difficult to service the 90%.

Arrogant? Golly I hope not. I’d like to think it’s self-awareness. If a client doesn’t want my advice, clearly he/she would be a better fit for a different advisor.

Steven Barrett

We all work with people that we don’t necessarily like or get on with but have a professional relationship with. They respect what you do and pay for the advice.

In my experience, I’m not much benefit to difficult clients anyway. I need clients to engage with me so I can do my job properly. The difficult clients I’ve had, tell me the bare minimum, so it is impossible to give them the level of advice that you normally give. And once you do give them advice, they ignore you anyway!

http://www.ssfinc.com Connie Stone

I found all of the above comments interesting. After nearly 26 years in practice, I feel I’ve paid my dues with respect to serving clients who weren’t a good fit with my practice. Now I select clients who I enjoy being with, and who value and pay for my services.

That said, there are times when I will do pro bono cases on behalf of FPA or a referral from an estate planning attorney. If I meet with a struggling young couple, I may give them an hour of my time at a flat rate to help them with their biggest hurdle, which is usually debt. Then I welcome them to come back when they are in a position to move forward. Doing this occasionally won’t hurt my bottom line. It will lift my spirits.

I agree that those who need the most planning are the least able to pay for it. They often are most vulnerable to advisors with less than a fiduciary standar. That is why though CFP Board, NAPFA and FPA, we provide online andin-person community financial education, sometimes partnering with local organizations for events.

“Giving back” is an important value to me.
Yes, I’m in business to be profitable. And I am also a human being who wants to empower others. I make sure I spend a set amount of time every month on the latter.

I think it all comes down to individual values. Professional organizations create many opportunities for us to help those in need who cannot afford our services. We may not have an industry standard for doing this, but we certainly have the ability and means. All it takes is the will and commitment to follow through.
~Connie~

Michael Kitces

Austin,
I think Charlie does raise an interesting question here – to what extent is it the financial planner’s obligation, or even best practice, to BE the one that helps convince the client to move forward and implement?

In other words, to what extent is the failure of the client to implement the client’s fault for not being an implementer, or the planner’s fault for not effectively helping the client make the behavior changes necessary to implement?

Clearly we’re not going to force “everyone” to make every change, but I have to admit the idea that “it’s always, entirely the client’s fault” doesn’t sit well with me, either?
– Michael

Michael E. Kitces

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.